For six years, federal guidance told hospitals to bill Medicare for a recovered organ the moment it was removed — before anyone knew whether a Medicare patient would ever receive it. A federal inspector general now says that single instruction cost the program an estimated $380 million, and the agency responsible has yet to say whether, or how, it will fix it.
The Department of Health and Human Services’ Office of Inspector General published the finding on September 1, after sampling 180 organs recovered by Certified Transplant Centers between 2017 and 2022. Fifty-five of them — nearly one in three — had been reimbursed by Medicare as “usable” even though 43 were transplanted into patients with no Medicare coverage at all, and 12 were never transplanted into anyone. Extrapolated across the full six-year period the audit covered, OIG puts Medicare’s total exposure at $379.9 million paid for organs that produced no Medicare-covered transplant whatsoever.
The gap is not a story about hospitals gaming the system. It is a story about a federal agency writing guidance that conflicted with its own governing statute for years, putting a dollar figure on what that conflict cost, and then declining — for now — to commit to fixing it.
What Medicare Actually Pays For
Medicare does not pay transplant centers a flat fee per transplant. Under 42 CFR Part 413, Subpart L, it reimburses Certified Transplant Centers for the “acquisition costs” of an organ — surgical recovery, preservation, and transport — on a cost-report basis, prorated by the share of a center’s organs that qualify as “Medicare usable.” Under 42 CFR 413.412, an organ is excluded from that count only if a physician determines on inspection that it is not medically viable for transplant. Nothing in that regulatory framework requires anyone to confirm, before billing, that the organ actually reached a Medicare beneficiary.
That is the gap OIG zeroed in on. Federal statute limits Medicare’s organ acquisition reimbursement to organs actually transplanted into Medicare enrollees. CMS’s guidance to transplant centers, however, presumed that any organ surgically recovered and furnished to an Organ Procurement Organization for transplant would eventually benefit a Medicare patient — an assumption built into the cost-reporting formula rather than checked against outcomes. Two rules, pointed in two different directions, for six straight years.
This is not a line item CMS can shrug off as rounding error. Medicare reimbursed transplant centers more than $3 billion in organ acquisition costs for approximately 39,000 organs in 2023 alone. The “Medicare usable” designation OIG is now flagging as misapplied is the formula that allocates a multibillion-dollar-a-year federal expenditure — not a footnote in the Medicare budget, but one of the mechanisms that decides how a large piece of it gets divided up.
The Sample, and What It Found
OIG’s methodology was straightforward: pull a random sample of organs Certified Transplant Centers had reported as Medicare usable during the audit period, and check what actually happened to each one. Of 180 organs sampled, 55 should never have counted — 43 were transplanted into recipients who were not covered by Medicare at the time, and 12 were not transplanted into anyone at all. Medicare had reimbursed transplant centers $2.8 million for those 55 organs. Extrapolating the sample’s error rate across the full population of organs reported as Medicare usable from 2017 through 2022, OIG’s report puts the government’s total exposure at $379,895,793 — the $380 million figure now circulating in coverage of the audit.
A separate, narrower finding produced OIG’s only firm, immediate dollar recommendation: two Certified Transplant Centers could not produce documentation for five organs, accounting for $154,210 in reimbursement OIG says should never have been paid at all, undocumented or not.
A Regulator Half-Agrees With Itself
OIG’s report makes two recommendations, and CMS’s response to them is the most telling part of the audit. On the smaller, concrete ask — recovering the $154,210 in undocumented reimbursement from the two transplant centers — CMS concurred. That money is, at least nominally, coming back.
On the larger ask — rewriting the guidance responsible for the other $379.9 million, so that transplant centers count and report as “Medicare usable” only organs actually transplanted into Medicare enrollees — CMS did neither. Not a rejection. Not an agreement. The agency’s status on fixing the rule that produced a nine-figure gap is listed as open, with a status update due to OIG by February 28, 2027 — five months from now, and more than a year and a half after OIG first flagged the conflict between the guidance and the statute.
That distinction matters more than the dollar figure. Recovering $154,210 from two hospitals is a rounding error against a $380 million estimate; it fixes nothing about the guidance that produced the other 99.96 percent of the shortfall. Until CMS actually revises the rule, every organ recovered under the current instructions is still being counted on the same assumption OIG’s audit just finished disproving.
This is not an isolated finding, either. The $380 million estimate is the first completed project in a five-part OIG work plan examining whether the costs Organ Procurement Organizations and Certified Transplant Centers report to Medicare are allowable, reasonable, and consistent with Medicare requirements. Four more audits in that series remain open, with an estimated completion date in fiscal year 2027. And the underlying concern is not new to this administration or the last one: in September 2023, a bipartisan group of Senate Finance Committee members — Chairman Ron Wyden, Charles Grassley, Benjamin Cardin, and Todd Young — wrote CMS after a separate OIG audit found an organ procurement organization had billed Medicare $664,295 for entertainment, meals, lobbying, and gifts. Their complaint was structural: organ procurement organizations and transplant centers operate as cost-reimbursement entities, some with effective geographic monopolies, that can “pass through all expenses to payors with little accountability.” Two years and two administrations later, OIG has put a specific dollar figure on exactly the kind of gap those senators warned about — and a CMS instruction, not a rogue actor, is the reason it exists.
The Case for CMS’s Side
None of this means the transplant centers did anything wrong, and it would be a mistake to read this audit as a story about fraudulent hospitals. The Certified Transplant Centers billed the way CMS’s own guidance instructed them to bill. Organ allocation happens on emergency timelines — a recovered organ often has to be matched to a recipient and transplanted within hours, long before anyone could confirm that recipient’s final insurance status through the ordinary channels a hospital would use for scheduled care. A framework that required real-time verification of a transplant recipient’s Medicare enrollment before a time-sensitive organ is even offered would create its own risk: organs discarded or delayed over a paperwork mismatch rather than a medical one.
There is also a fair argument, raised by some financial commentators covering the audit, that $380 million spread over six years against $3 billion a year in organ acquisition spending alone is a small percentage of a large program — worth fixing, not worth a scandal narrative. Medicare’s organ acquisition reimbursement exists to help keep the country’s transplant infrastructure functional at all; a rule that erred toward keeping organs moving rather than tracking every dollar in real time is not, on its face, an unreasonable trade-off for a life-or-death logistics system.
But that argument, whatever its merits on the underlying policy, does not explain CMS’s response to its own watchdog. Nobody at OIG suggested transplant centers acted in bad faith, and the recommendation on the table is not to punish hospitals — it is to align CMS’s own written instructions with the federal statute those instructions are supposed to implement. Sixteen months after being told its guidance conflicts with the law, the agency has managed to say yes to recovering six figures, and has yet to say yes, no, or even “here is our plan,” to fixing the nine-figure problem underneath it.
What This Reveals
This is a small audit by federal standards — $380 million is a fraction of Medicare’s roughly $900 billion in annual net spending. Its significance is not the size of the number. It is what the response to the number shows about how a federal agency treats its own inspector general’s findings when the fix requires actual rulemaking rather than a wire transfer.
CMS did not dispute OIG’s math. It did not argue the statute means something else. It simply has not yet decided whether to bring six years of guidance into line with the law that guidance was supposed to implement — and will not have to say so, on the record, until early next year. In the meantime, the same counting rule OIG says has been misallocating Medicare dollars since at least 2017 remains the rule transplant centers are using today.
RightSideNews has documented this same pattern across other agencies this year: an EPA-funded school bus program that delivered fewer than 40 percent of the buses it paid for after its own inspector general flagged unmonitored rebates, and a FEMA disaster-relief program whose internal screening process broke federal law years before anyone outside the agency found out. Different agencies, different mechanisms — but the same underlying failure mode: an inspector general does its job, documents the gap in detail, and the agency’s own response to that documentation is where the real story ends up living.
CMS has until February 28, 2027, to tell its inspector general what it intends to do about guidance the government’s own auditors say has been costing Medicare tens of millions of dollars a year, on top of four more audits in the same OIG series still pending. Whether that deadline produces a rule change or another open-ended non-answer is worth watching — because the organs recovered under the current guidance between now and then are still being billed exactly the way the ones OIG just audited were.